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Unlocking These Mutual Funds

Now you can grab some solid performers that are open to new investors again.

You're a fan of mutual funds, right? After all, they're a rather compelling proposition. They save you from having to study and evaluate hundreds of stocks, make buy-and-sell decisions, and so on. They offer you the convenience of letting a smart manager do all the hard work for you -- for a modest fee. (That's the best-case scenario, of course. Many funds are lackluster performers, so it's critical to choose from among the best.)

You've probably had this experience that I've had: You discover an exciting fund and are eager to invest in it, anticipating solid growth over the long haul, and a comfortable retirement thanks, in part, to its talented managers. But wait -- it's closed!

It's true -- great funds sometimes close to new investors, turning their money away. In fact, I suspect that good funds are more likely to close than bad funds, because by limiting the money they have to invest, they'll run a lower risk of spreading themselves too thin.

Good newsFortunately, many good funds will reopen on occasion. That has happened recently with the following (I'm including their market-beating records as well):

Fund

5-Year Average Annual Return

10-Year Average Annual Return

Recent Top Holdings

Vanguard Explorer (VEXPX)

9.7%

8.6%

AK Steel(NYSE:AKS), Ciena(NASDAQ:CIEN)

Vanguard Health Care (VGHCX)

10.3%

11.3%

Walgreen(NYSE:WAG), Schering-Plough(NYSE:SGP), Eli Lilly(NYSE:LLY)

Mathews Pacific Tiger (MAPTX)

20.4%

20.4%

Infosys(NASDAQ:INFY), Taiwan Semiconductor(NYSE:TSM)

Data: Morningstar.

What to doSo should you rush out and snap up shares of reopening funds? Well, if you're not sure, it often can't hurt to just buy a few shares; that will make you an existing shareholder. That way, if and when the fund closes later, you may be able to buy more shares. But some funds have steep minimum investment amounts, so that strategy won't always work. The Vanguard Health Care fund, for example, requires a $25,000 minimum.

A better route might be to keep a list of funds you'd like to invest in, and to note when any closed ones reopen. Despite any excitement, keep your cool and evaluate each fund carefully. If a fund is focused on a region or a niche, ask yourself whether its prospects are still favorable.

If you'd like to find some top-notch funds, I invite you to take advantage of a free trial of our Motley Fool Champion Funds newsletter service.

Author

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter... Follow @SelenaMaranjian